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The Fed rate hike was more 'hawkish' than you think

Slow and steady wins the race. That seemed like the initial message from the Federal Reserve when it raised interest rates for the first time in nearly a decade. But after a second look, the Fed's actions are actually more "hawkish" than "dovish."

In its statement, the Fed indicated that it remains "data dependent," and will watch inflation expectations closely and watch credit and international markets while it gradually moves up rates. This is about as dovish a statement the Fed can make, which leads one to wonder why the Fed bothered to raise its short-term rate at all.

Rodrigo Garrido | Flickr | Getty Images

But after listening to Janet Yellen's testimony, I now believe that the Fed's actions are more hawkish than I originally interpreted them to be.

There are several reasons for the play-call reversal.

First, not mentioned in the statement is the fact that, in addition to raising its target for the federal-funds rate, the central bank is raising the discount rate a quarter point to 1 percent. That is to be expected. However, the Fed is also raising the rate it pays member banks to hold required reserves at the Fed, doubling that payment to a half-point. This gives banks a much bigger incentive to earn a half-point on their cash, risk free!

That is a major disincentive for banks to make further loans. And it comes at a time when the velocity of money, or the speed with which the money supply turns over, is close to zero.

The increase in interest paid on bank reserves, the hike in the discount rate and the lifting of the cap on reverse repurchase agreements, used to drain excess liquidity from the banking system, are tantamount to a stealth tightening of policy!

I suspect it may take the markets a day or two to figure this out.

But the Fed has just become a hawk in dove's clothing.

As far as financial assets are concerned, a reversal of one's bullish stance may be in order as well.

Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. Follow him on Twitter @rinsana.